Investment in the Irish oil and gas sector will be slashed over the next two years

IRELAND IS STILL regarded a high-risk location for oil and gas exploration.

That’s according to a report by accountancy firm PwC, which found that investment in the sector is expected to dramatically decrease over the next two years.

Just €300 million will be pumped into Ireland’s oil and gas industry in 2017 and 2018 – down from the €1 billion invested last year alone, which may raise concern about the long-term prospects of the industry given the cost of exploring here.

Unsurprisingly, the vast majority of petroleum service providers, exploration firms and production companies said the decrease in oil and gas prices was having a significant impact on their business.

“At times of low oil and gas prices, investors will invest in high return low risk locations, which unfortunately we are not,” said Ronan MacNioclais, partner at PwC oil and gas practice.

“We would expect the Irish oil and gas industry to experience continued challenges as the price of oil and gas remains low.”

High risk

The PwC report noted that the reduction in prices contributed to 170 job losses in Longford, where Cameron Ireland, which makes compression systems for oil and gas firms, intends to cease production.

That said, almost 85% of those surveyed said they believe there is a high level of petroleum reserves yet to be discovered in Ireland.

Despite the optimism, “exploration in Irish waters is still regarded high-risk with no certainty of any returns,” the report said.

“It will be significantly more challenging to obtain finance for any projects investing in Irish waters” because Ireland doesn’t have a history of significant commercial discoveries, it said.

Corrib

“Reputational damage” caused by the controversial Corrib gas project, which attracted considerable opposition, was also seen as one of the main hurdles to developing the industry in Ireland.

“The events at Corrib have meant that investment decisions involving Ireland are likely to receive a more rigorous review than those of other territories,” the report said.

Corrib gas protests

Galway Harbour and Shannon Foynes were identified as the ports most likely to benefit from petroleum investment in Irish waters.

Ronan MacNioclais said that despite the largely negative outlook, the survey indicated some promising long-term results for the sector.

He noted that there were 28 licencing options granted to international players in 2015, which he said was “tremendously encouraging”.

PwC told Fora that 30 businesses and economists with an interest in the sector were surveyed, which it said was reflective of this “very specialised industry”.